Artie was finally going in for the bypass that his cardiac surgeon had recommended. Artie had stalled for as long as he dared, in order to finish the last big business deal on which he was working, the one that would make his name and fortune. But now, it was time. Artie knew the recovery would be long and difficult. He also knew that recovery wasn’t certain. The last thing that Artie needed to do before going under the knife was to put an estate plan in place. Indeed, Artie was already getting questions from the hospital and his business partner about powers of attorney. 

Definition

A power of attorney is a legal document granting a competent adult individual the authority to temporarily conduct one’s affairs in one’s absence or during one’s disability. Powers of attorney can be great conveniences for individuals who are planning travel, submitting to surgeries, or just taking breaks from managing their legal, business, and other personal and financial affairs. A power of attorney can enable a spouse, adult child, trusted business partner, or professional fiduciary to relieve the one granting the power from having to act in their own interest, when they either cannot so act or wish not to do so for a defined, usually short period. 

Types

Your legacy may benefit from having more than one type of power of attorney in place. A first type of power of attorney enables the designated fiduciary to make legal, financial, or business decisions, as a grantor might ask a spouse, business partner, attorney, accountant, or other close family member or trusted professional to do during the grantor’s hiatus. A second type of power of attorney enables the designated fiduciary to make healthcare decisions for the grantor, as a grantor might ask a spouse or adult child to do during the grantor’s surgery or other disabling illness, injury, or treatment. A third type of power of attorney provides for the temporary guardianship of a minor child to make decisions about the child’s daily care, supervision, and medical care, as parents might ask a relative or close friend to do when away together on a vacation without their child. You should already see how powers of attorney can keep order in your affairs to promote your legacy.

Duration

A power of attorney may also be either temporary for a specific period of time such as one week, one month, or until a certain event occurs or concludes, or indefinite until the grantor revokes it. Temporary powers of attorney can be useful when the grantor intends to be away for a specific, limited, and definite period, such as for a week of business or vacation travel. Temporary powers terminating on occurrence or conclusion of an event can be useful to complete specific transactions, such as for the agent to conduct a closing in the principal’s absence. By contrast, indefinite powers of attorney can be useful when the principal anticipates a surgery or other disabling treatment, recovery from which may be uncertain and extended. Powers of attorney can also be durable or non-durable. A durable power of attorney persists during the principal’s disability, while a non-durable power of attorney loses its authority with the principal’s disability. Healthcare powers of attorney are typically durable, anticipating the grantor’s disability. Financial powers of attorney are often non-durable, void in the event of the grantor’s disability. Be thoughtful as to the type and duration of any powers of attorney you grant. Use powers of attorney to ensure that you keep your affairs in order, enhancing your legacy.

Purpose

You should already see how these three types of power of attorney can promote your legacy in important ways. A legal and financial power of attorney can enable your spouse, attorney, business partner, or other trusted agent to manage your legal, business, and financial affairs for your best benefit and the benefit of your family members and anticipated heirs, while you travel or recover from illness or injury, or even during your last illness. A healthcare power of attorney can enable your spouse or adult child to make decisions about your medical care when you are unable to do so, to help you recover, prolong your life, or ease your suffering according to your prior instructions. A power of attorney for guardianship of a minor child can enable your relatives or trusted friends to care for your child or children in your temporary absence, to ensure that your children receive the care, education, supervision, and support they need when you are not present to make those decisions. Use powers of attorney sensitively to enhance your legacy.

Contents

A power of attorney document generally begins by naming the grantor or principal who is giving the authority to act, the grantee or agent receiving the authority to act, and the date of the grant. The power of attorney should next identify its purpose, while enumerating the powers that the principal gives to the agent. The enumeration of powers should be clear and specific as to scope, for instance whether the powers extend beyond financial matters to legal matters, and limitations, for instance if the agent has authority only to expend amounts or incur obligations up to $5,000 or a similar figure. The power of attorney should then state its duration including any events or conditions triggering its termination. The power of attorney should also reserve the grantor’s right to revoke the power and describe the manner of revocation. With the help of a qualified attorney, craft your power of attorney to accomplish your legacy goals. See the example powers of attorney at the back of this guide.

Execution

State laws can vary on execution requirements for powers of attorney. Generally, you must sign and date the power of attorney, in some states in front of two adult, competent witnesses who by their own signatures attest to your identity, competence, and signature. Some states instead require that you sign before a notary public who then notarizes the document confirming your identity, competence, and signature. Other states permit either two witnesses or notarization. States generally require the agent to whom you grant powers to sign an acknowledgment and acceptance of the power of attorney. A few states require that you file the power of attorney with a specific public office. Take care to properly execute your power of attorney to ensure its effectiveness in promoting your legacy.

Retention

You should retain the original power of attorney in a secure place among your other papers, if your state does not require that you file the original. Your agent will need a copy of the power of attorney to use it in the necessary and appropriate transactions. Your agent may also have to give copies to those who rely on the power of attorney to complete transactions. You may also wish to give copies of the power of attorney to your spouse, adult children, or others who may need or wish to help manage your affairs by directing interested parties to your power of attorney or holding your agent to the document’s limitations. You grant a power of attorney for good reasons. Don’t hesitate to facilitate its appropriate and beneficial use, including by sharing copies of it with those who need to rely on it or should monitor its use.

Exercise

Your power of attorney binds your agent to exercise the power of attorney only consistent with its terms. Your agent should use it for the authorized transactions and not for any transaction beyond its scope and terms, or beyond its duration. Your agent has the duties of a fiduciary and should therefore also not use your power of attorney for any self-interest conflicting with your interests. Your agent has the duties of loyalty, reasonable care, and reasonable diligence within the standards of a fiduciary acting in the same circumstances and capacity. Violations of those duties can lead to the agent’s personal liability for loss and potentially other penalties such as for criminal fraud. Choose your agent wisely. Then hold your agent accountable to these fiduciary duties, to preserve, protect, and enhance your legacy.

Revocation

As long as you remain mentally competent to do so, you generally have the authority to revoke a power of attorney that you previously granted. You may, for instance, revoke a power of attorney that you no longer need, that has already accomplished its objective, that involves some question over the agent’s continuing loyalty or fitness, or without any specific cause. To accomplish revocation, you generally need to sign a writing clearly stating that it revokes the specific power of attorney that your revocation identifies by principal, agent, date, and purpose. Your state law may require you to have your signature notarized on the revocation. You must generally then notify the agent of your revocation by serving a copy of the executed revocation. You should also generally notify any third party who may rely on the revoked power of attorney, if the agent continues to attempt to use it. If your state required you to file the power of attorney with a specific public office, you should also file your revocation with that office. Beware leaving unnecessary powers of attorney unrevoked, lest an agent misuse one and thereby harm your legacy.

Representation

As in the case of a will and trust, you should generally have a qualified estate planning attorney advise and assist you with the execution of powers of attorney, especially those over legal and financial affairs. Hospitals and other healthcare providers may offer you template healthcare power of attorney forms, which may speed and ease your execution of a healthcare power of attorney. But beware following a form that misleads you into giving up powers, rights, and interests, and making uninformed decisions about your life-saving treatment and care. Instead, execute powers of attorney at the same time you complete or update your full estate plan, with qualified attorney representation. Your life, finances, legal affairs, and legacy are worth protecting. 

Reflection

Do you have a durable power of attorney for healthcare in place? If so, does it designate your spouse, adult child, or another trustworthy individual? And does it reflect your current commitments, wishes, and beliefs about your life-saving treatment and care? Would a power of attorney for financial, business, or legal matters assist you in keeping your matters in order? If so, whom would you best designate, and with what powers for what purpose and duration? Should you and your spouse grant a temporary power of attorney for guardianship of your minor child or children to ensure their care and supervision in your absence? If you have executed powers of attorney, do you know where they are? Have your agents accepted the powers of attorney, and if so, do your agents have executed copies? Do you need to revoke any powers of attorney that you previously executed?

Key Points

• A power of attorney grants authority to another person to act for you.

• Powers of attorney can address legal, financial, and health affairs.

• Powers of attorney can also provide for temporary child guardianship.

• Powers of attorney may be temporary or indefinite.

• Powers of attorney may also be durable after your mental disability.

• A power of attorney should clearly state its purpose, scope, and powers.

• A power of attorney should also clearly state the principal and agent.

• Execute a power of attorney according to state law.

• Execution requires signature and may require witnesses or notary.

• The agent must acknowledge and accept the power by signature.

• Retain the original power and distribute copies to the agent and others.

• An agent must act loyally and with reasonable care and diligence.

• Revoke a power with a signed and notarized writing and notice.

• Get qualified attorney representation to execute powers of attorney.

Read Chapter 16.